23/06/2013

Climate change domestic mitigation policies in Kazakhstan: a technical economic evaluation

Nazarbayev University Research and Innovation System

Aiymgul Kerimray, Diyar Tokmurzin, Kaiyrbek Ayashev, Yerbol Akhmetbekov, Yerbol Sarbassov, Rocco De Miglio (E4SMA), Anar Ibrayeva

IEA-ETSAP Workshop, Paris, June 18, 2013

Content

 Introduction  Methodology: the TIMES-KZK model  Main scenario assumptions  Results and analysis  Conclusions

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Main features of Kazakhstan in terms of contribution to CO2 emissions increase

 Large area (2.7 Mkm2, = 4 x France)  Low population (16.9 M) & density (5.94/km2)  Low per capita GDP: 13100 $2011 (PPP)  Deep economic crises in the nineties, Strong economic development in this century  Developed industrial sector  65% of buildings were built in USSR period

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Main features of Kazakhstan in terms of contribution to CO2 emissions decrease

 Large reserves of cheap Coal and Oil  Large amount of Gas resources  Considerable hydro potential, under development  Large potential of Wind resources  Large potential of Solar resources  10% of global uranium resources (2nd place in the world after Australia)

Hydro energy resources

Hydropower accounts for approximately 12 percent of Kazakhstan’s total generating capacity. Average annual hydropower generation in Kazakhstan amounts to 7.78 billion kWh. By absolute indices of potential hydro resources Kazakhstan is third amongst CIS countries. Kazakhstan hydro resources are spread throughout the country, but there are three major districts: the Irtysh River basin with main tributaries (Bukhtarma, Uba, Ulba, Kurchum, Kardzhil, South-Eastern zone with the Ili River basin, and the Southern zone – basins of Syrdaria, Talas and Churivers. Programs of small hydropower development in Kazakhstan include reconstruction and renovation of previously constructed small HPPs, adding small HPPs to water management projects with already existing water retaining structures with the aim of utilizing waste releases, and construction of new small HPPs for power supply of users in the outlying districts of the power system. Favorable Factors for Development of Hydro Potential: · Interest of regional authorities in small hydro; · Private investors of small hydro are provided with state short-term credits; · There are some privileges (tax holidays) in realization of investment projects Despite the interest in promoting mainly small hydropower plants, Kazakhstan currently has several hundred MW of capacity under construction in the form of large hydroelectric power plants. A few small hydropower plants are under construction and planned for Kazakhstan as well.

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Wind map of Kazakhstan

Wind energy resource

Potential Annual 1.8 TW*h Main wind direction Northeast, Southwest Annual average wind speed More than 50% of territory - 4~5m/s [in 30m height] More than 10 places - 8~10m/s Favorable place Djungar Gates (East side of Kazakhstan) - 525W/m2 Chylyk Corridor(South side of Kazakhstan) - 240W/m2

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Solar potential

 Average insolation duration -2,200~3,000hr/yr  Average insolation - 1,300~1,800kW/m2/yr  World's second largest Silicon (main raw material of solar cell) reserve

Domestic energy resources

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Key Data from NEB-2009

KAZAKHSTAN 2009 (ktoe) Coal Crude Oil Products Gas Hydro Combustible Electricity Heat Total Oil Renewables & Waste

Production 42,867 79,275 - 22,576 592 1,338 - - 146,649

Imports 538 6,029 1,645 2,573 - 0 147 - 10,932

Exports -11,349 -68,897 -6,057 -8,383 - - -205 - -94,890

Total primary energy supply 31,985 16,450 -4,331 16,976 592 1,345 -57 - 62,959

Final consumption 8,119 7 8,976 3,816 - 1,037 4,548 5,962 32,464

Industry 3,932 0 1,789 753 - 3 2,843 2,300 11,620 Transport 13 - 5,868 1,172 - 1 94 13 7,162 Other 4,073 - 1,022 1,849 - 1,032 1,610 3,648 13,237

 Outdated energy infrastructure

Policies and Measures: energy

 Law № 210-I on energy savings dated 25 December 1997  Law № 165-IV РК dated 4 July 2009 on support of utilization of renewable sources of energy  Government Decree N 857 dated 25 August 2003 on wind energy development  Government Decree № 1129 dated 29 October 2010 on ratification of Power energy development plan for 2010-2014  Law on energy savings and energy efficiency enhancement dated 13 January 2012  Plan of gasification of Kazakhstan  Master-plan project on the “development of Kazakhstan’ power sector till 2030“  Modernization of housing and communal services between 2011 and 2020  “Strategic Development Plan of the Republic of Kazakhstan to 2020”

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GHG historical series

 Total GHG emissions in 2009 – 262.27 mln tons of CO2 equivalent (third in CIS after Russia and Ukraine)

 World GHG emissions– 32 bln tons of CO2 equivalent  Share of KZK - 0.74% of global GHG

 Over 2001-2009 the average annual growth rate of GHG emissions in KZK 6.9% (World – 3.3%, China 9.7%)

 Share of emissions from energy sector - 88.3%  98% of which amounted for fuel combustion  Solid fuel is the main contributor to the GHG emissions from fuel combustion

 Kazakhstan takes 14th place in the world with CO2 emissions per capita (15 tons)  3 times higher that the world average

Inventory 2009

GREENHOUSE GAS SOURCE AND SINK CO2 CH4 N2O Total CATEGORIES CO2 equivalent (Gg ) Total (Net Emissions) 204310 44655 8873 259167 1. Energy 194545 27004 673 222222 A. Fuel Combustion (Sectoral Approach) 191136 653 673 192461 1. Energy Industries 87331 25 347 87703 2. Manufacturing Industries and 25766 47 108 25921 Construction 3. Transport 20379 124 34 20537 4. Other Sectors 13208 384 49 13640 5. Other 44452 72 135 44660 B. Fugitive Emissions from Fuels 3409 26352 NA,NE,NO 29760 1. Solid Fuels 149 19763 NA,NO 19912 2. Oil and Natural Gas 3260 6589 NA,NE,NO 9849 2. Industrial Processes 12243 27 NA,NO 13598 A. Mineral Products 3671 NO NO 3671 B. Chemical Industry 253 27 NA,NO 279 C. Metal Production 8319 IE,NA,NO NA 8998 D. Other Production NE NE E. Production of Halocarbons and SF6 NA,NO F. Consumption of Halocarbons and SF6 650 G. Other NA NA NA NA

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Kyoto Protocol

On March 26, 2009 the Decree of the President of Kazakhstan had ratified the Kyoto Protocol to the UN Framework Convention on Climate Change. Kazakhstan is a Party to Annex 1 for the purposes of the Kyoto Protocol. At the CMP in Doha, which concluded in December 2012, changes were made to Annex B of the Kyoto Protocol which stated that for Kazakhstan the quantified emission limitation or reduction commitment over the 2013 – 2020 period should be 95% of the base year of 1990. In addition, Kazakhstan has pledged to reduce greenhouse gas emissions by 7% by 2020, as a percentage of the 1990 reference year.

National Emissions Trading Scheme

The development of the Kazakh Emission Trading Scheme was enacted into law on 3 December 2011 through an amendment to Kazakhstan’s “Ecological Code”, thereby establishing a national market mechanism for reduction of GHG emissions which should allow for both national and international trade in emissions allowances, in addition to initiating the development of a domestic offset scheme. Since adoption of the amendment to the Ecological Code, 17 Government decrees and 14 Ministerial orders have been drafted which regulate the Kazakh ETS and the domestic offset scheme, and to date all but one of these have been adopted. In accordance with the Ecological Code the pilot phase of the Kazakh ETS started on 1 January 2013, and is currently intended to last one year. The pilot phase is to be followed by the “second trade period”, the duration of which is still to be officially determined, but is expected to cover the years 2014 to 2020. A proposal is currently under consideration to divide the second trade period into an ETS phase II (2014-2015) and ETS phase III (2016-2020) to allow further fine tuning of the scheme. Only CO2 emissions are currently planned to be covered by the Kazakh ETS, at least for the duration of the pilot phase, and although discussions are on-going as to whether methane emissions should be covered by the scheme at a later date, this is not reflected in any current legislation or other relevant documentation.

[Thomson Reuters Point Carbon, The Domestic Emissions Trading Scheme in Kazakhstan, 2013]

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TIMES-KZK model

Region: national single-region model Time horizon: 2009 – 2030 (flexible, extensible to 2050) Time periods: 7 (flexible) Time slices: 9 - Summer day/night/peak; - Intermediate day/night/peak; - Winter day/night/peak

Costs and prices in the model in constant USD 2000

Main focus on the generation side, identification of the losses, space heating devices

TIMES-KZK model: elc&heat

Oil Gas Coal-1 Coal-2 Coal-3 Hydro Elc Heat Elc Heat

OIL - PP Distr. to RSD to GAS - PP RSD services

HYDRO - PP Distr. to COM to ELE - Losses COM services GAS - CHP

Distr. to AGR OIL - DHP to AGR services GAS - DHP HEAT - Losses

2646 Distr. to TRA to COAL - PP TRA services COAL-1 12131 4 coal types: 2891 PRODUCTION COAL - CHP Distr. to IND to IND services Other bituminous (ELC) 4953

24962 COAL - PP COAL-2 3662 Subbituminous (ELC) PRODUCTION COAL - CHP 2030 Lignite (ELC) COAL - DHP 1779.3 COAL-3 1157 Coking Coal (UPS) PRODUCTION COAL - CHP

3995.2 COAL-4 to Data in ktoe PRODUCTION UPS secondary transformation (coke oven coke production)

to GAS - PP IND services

to GAS - CHP IND services 1197 to COAL - CHP IND services 98 to COAL - PP IND services 1474 to COAL - CHP IND services

106 to COAL - CHP IND services

897 10322 Export to ROW 108

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TIMES-KZK model: generation stock

GW e GW e PP HYDRO Public 2.231 PP HYDRO Industrial 0.000 PP COAL Public 7.100 PP COAL Industrial 0.084 PP GAS Public 0.000 PP GAS Industrial 1.338 PP OIL/GAS Public 1.230 PP OIL/GAS Industrial 0.000 CHP COAL Public 4.178 CHP COAL Industrial 0.916 CHP GAS Public 0.636 CHP GAS Industrial 0.808

15.374 3.146

TIMES-KZK model: elc T&D

Electricity generators Transmission - 500 kV Transmission - 220 kV Distribution grid Demand sectors

Existing Transmission Transmission 220 kV Existing and New PP Distribution Improved Improved Existing Existing Transmission Transmission

Refurbished Refurbished Transmission Transmission Improved and Existing and New New CHP Distribution New New Transmission Transmission

Elc Elc Elc Elc

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TIMES-KZK model: heat T&D

Heat production Heat Transmission Heat (sectoral) Distribution Energy services

Existing-RES (d/m/s) Existing-RES (d/m/s) Existing - RES (d/m/s) Existing and New Pure Heat New-RES (d/m/s) New-RES (d/m/s) New - RES (d/m/s) Existing Transmission New Improved-RES (d/m/s) New Improved-RES (d/m/s) New Improved - RES (d/m/s)

Automatic Controller -RES (d/m/s) Automatic Controller -RES (d/m/s) Existing and New Automatic Controller - RES (d/m/s) CHP

Existing-COM (d/m/s) Existing-COM (d/m/s) New Existing - COM (d/m/s) Transmission New-COM (d/m/s) New-COM (d/m/s) New - COM (d/m/s)

New Improved-COM (d/m/s) New Improved-COM (d/m/s) New Improved - COM (d/m/s)

Automatic Controller -COM (d/m/s) Automatic Controller -COM (d/m/s) Automatic Controller - COM (d/m/s)

District District Heating Heating

TIMES-KZK model: indicators and assumptions - low GDP growth scenarios

Indicator Unit 2009 Thermal requirements for space heating kWh/m2 265 Water heating demand Liters per person per day 30 (ΔT=35°C) Share of district heating in the residential Fraction 40% sector Residential Space heating demand Mm2 182.8 Space cooling demand in the residential sector Mm2 0 Driver 2009 2015 2020 2025 2030 End-Use Driver GDP 1 1.42 1.90 2.42 3.09 AGR GDP GDPP 1 1.30 1.61 1.96 2.38 COM GDP POP 1 1.09 1.18 1.24 1.30 IND GDP RES GDPP, POP COMMODITY [PJ] 2009 2015 2020 2025 2030 TRA GDPP, GDP Bituminous Coal 37.5 37.5 37.5 37.5 37.5 Sub-Bituminous Coal 432.2 432.2 432.2 432.2 432.2 Natural Gas 243.2 243.2 243.2 243.2 243.2 Crude Oil 2143.3 2657.7 3215.0 3215.0 3215.0 Natural gas liquids 391.0 391.0 391.0 391.0 391.0 Electricity (net) -4.4 -4.4 16.2 17.8 17.8

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TIMES-KZK model: assumptions

Sector Description Mining Extraction cost for coal in a range of 0.5-0.7 $2000/PJ Mining Extraction cost for oil in a range of 0.9-1.8 $2000/PJ Mining Extraction cost for gas in a range of 1.1-1.9 $2000/PJ Energy Trades Oil products self-sufficiency after 2015 Existing generation Long lifetime extension (+100000 hours) stock New plants A new coal-fired power plant (Balkhash) starts to operate in 2015 New plants A new hydro power plant (Moynak) starts to operate in 2012 New plants Endogenous investments in new generation capacity frozen to zero until 2015 New plants No Nuclear in the energy mix Losses Electricity transmission losses in the BY: 8% Losses Electricity distribution losses in the BY: 15% Losses Heat losses in the distribution in the BY: 20%

TIMES-KZK model: assumptions

Gasification of the system - BY gas consumption: 20 Bcm - Additional gas from Caspian Sea Region from 2015 - Up to 6 Bcm import from Uzbekistan

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TIMES-KZK model: scenarios

Low GDP growth Scenarios:  “REF” - business as usual scenario without mitigation measures.  “CO2_M10” - with mitigation options costing up to 10$ per tCO2eq, least cost;  “CO2_M10-PE” - with mitigation options costing up to 10$ per tCO2eq, partial equilibrium;  “CO2_M30” - with mitigation options costing up to 30$ per tCO2eq, least cost;  “CO2_M30-PE” - with mitigation options costing up to 30$ per tCO2eq, partial equilibrium.

CO2 emission reductions by sector: model results

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TIMES-KZK model: TOTCO2eq by sector

TIMES-KZK model: CO2 by sector

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Total CO2eq by sector – Non-fuel ….combustion

IND UPS 90

80

70

60

50

40 MtCO2eq 30

20

10

0 2009 2015 2020 2025 2030 2015 2020 2025 2030 2015 2020 2025 2030 Ref M10PE M30PE

CO2eq Industrial Processes

INM chain IIS chain 40

35

30

25

20 MtCO2eq 15

10

5

0 2009 2015 2020 2025 2030 2015 2020 2025 2030 2015 2020 2025 2030 Ref M10PE M30PE

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Fugitive emissions by sector

Oil&gas Solid fuels 60

50

40

30 MtCO2eq 20

10

0 2009 2015 2020 2025 2030 2015 2020 2025 2030 2015 2020 2025 2030 Ref M10PE M30PE

Fugitive emissions by gas

CH4 (CO2eq) CO2 60

50

40

30 MtCO2eq 20

10

0 2009 2015 2020 2025 2030 2015 2020 2025 2030 2015 2020 2025 2030 Ref M10PE M30PE

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CH4 (combustion) by sector

AGR COM ELC IND RES TRA UPS 1.0 0.9 0.8 0.7

0.6 0.5

MtCO2eq 0.4 0.3 0.2 0.1 0.0 2009 2015 2020 2025 2030 2015 2020 2025 2030 2015 2020 2025 2030 Ref M10PE M30PE

N2O (combustion) by sector

AGR COM ELC IND RES TRA UPS 2.5

2.0

1.5

MtCO2eq 1.0

0.5

0.0 2009 2015 2020 2025 2030 2015 2020 2025 2030 2015 2020 2025 2030 Ref M10PE M30PE

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TIMES-KZK model: EEI

TIMES-KZK model: Consumptions

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TIMES-KZK model: Consumptions

Total CO2eq in Kazakhstan

Ref M10 M10-PE M30 M30-PE 93% of 1990 1990

500

450

400

350 MtCO2eq 300

250

200 2009 2015 2020 2025 2030

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Conclusion

The level of emissions doesn't exceed in 2020 its base year level (1990), but it will be higher than committed level by Kyoto Protocol. In order to satisfy the requirements of Annex B to Kyoto Protocol Kazakhstan has to implement additional policies and measures and follow one of the CO2 emission reduction scenarios.

THANK YOU FOR THE ATTENTION!

Anar Ibrayeva [email protected] +77026255526 Nazarbayev University Research and Innovation System 53 Kabanbay Batyr Ave., Astana, Kazakhstan 010000 www.nu.edu.kz

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